Saving Money on Rent by Going on the Cloud

Saving Money on Rent by Going on the Cloud

“In Washington, the first thing people tell you is what their job is. In Los Angeles you learn their star sign. In Houston you’re told how rich they are. And in New York they tell you what their rent is.”
– Simon Hoggart, English journalist and broadcaster.

In the wake of the sub-prime mortgage crisis, properties, both commercial and domestic, considerably depreciated in value. However, the recovery, at least for commercial property, has been quick. According to a recent report released by global real estate consultants Cushman & Wakefield, office space rentals increased in every major market in the world with the exception of Tokyo.

As a result, a company desiring to do business in midtown New York will have to pay, on the average, a rent of $115 per square feet annually. While that is quite some distance from the $241 rent per square feet that a business has to pay in Hong Kong, it is no small amount. In other words, what I am about to say impacts American business a lot, but Hong Kong businesses more so – saving money on rent by going on the cloud.

Five months back I had written an article on how moving to the cloud can save money for an organization (See: How Cloud Computing Can Save You Money). While that article detailed the direct cost-cutting benefits of cloud computing as a replacement for traditional IT infrastructure, today I will present an indirect effect of such a move – saving on rent.

As any company doing business in a metropolitan city will tell you, rent on office space is often a major expenditure on the income statement. In order to determine how much IT infrastructure contributes to that cost, let’s do a few back-of-the-envelope calculations. Although requirements vary widely, consider that a company based out of New York has an in-house data center that occupies 1000 square feet. This assumption is reasonable for a small data center serving 100 employees, and includes servers, cooling units, etc.

Therefore, the company ends up spending $115,000 on rent for the data center alone. By embracing cloud computing, this money can be saved. Even if cost of subscribing to a cloud-based service is factored in, the savings will still be considerable. And for larger companies, they add up to substantial amounts.

According to Bruce Hoernecke, CEO of New York-based IT systems integration firm BBH Solutions, companies can make better use of valuable real estate by leveraging cloud computing and hosting services for their applications and data. “The productivity benefits of cloud computing are well established at this point. The cloud offers secure and reliable access to your business information and applications from virtually any point on the globe via the internet. Companies that ‘enter the cloud’ also realize substantial savings on initial hardware investments because they can leverage their provider’s existing infrastructure,” he said.

He said that by going on the cloud, a company can “reduce the amount of space needed for IT infrastructure to one data rack with a router, switch, and cable patch panel.” BBH Solutions has a “Cloud Integration Services” program that helps companies make this transition efficiently and effectively.

Here’s another advantage that cloud computing offers over traditional IT infrastructure. With office rentals set to rise as the economy recovers, this advantage can only grow stronger.

By Sourya Biswas

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